War has been avoided for the moment, so now the market’s focus is back to supply and demand. On the supply side, the markets frets about a drop in Libyan oil production. On the demand side, data from China suggest strong demand. Copper, the metal of choice for China, is rallying on declining stocks and the perception of more demand. Yet overnight a report of a missile launch could have this market go ballistic.
RT News reported that Russia’s early warning radars have detected the launch of two ballistic rockets in the eastern Mediterranean, Russia’s Defense Ministry stated. The launch reportedly took place at 06:16 GMT Tuesday. The trajectory of the missiles is reported to have been from the central part of the Mediterranean Sea toward the eastern landmass. Both rockets have allegedly fallen into the sea, RIA Novosti news agency reported. Russia’s President Putin has already been informed about the incident by Defense Minister Sergey Shoigu. The Syrian embassy in Moscow currently has no information on the incident. There were no rocket attack signals or blasts in Damascus, the Russian embassy in Syria noted. The Israeli military apparently have no data on the launch either. No American ships or planes stationed in the Mediterranean have launched any missiles, U.S. officials told CBS News. A NATO spokesman said the alliance was trying to verify the reports. Until then, the bloc will not comment on the incident. Armavir, an early warning system against missile attack, is situated in southern Russia. It is run by the Russian Aerospace Defense Forces. They provide radar coverage of the Middle East. There are two radars there, with one of them facing southwest and the other southeast.
Yet already the market seems to be calming. Most of the risk-on play is being felt on the Brent Crude side. High quality crude is tightening in Europe as Libyan crude output is challenged, causing a record long position in the contract. Sky News reports “A weeks-long blockade by guards at key Libyan oil terminals has sent production plunging to under 100,000 barrels per day in a major blow to the economy, an official says. Guards, mostly ex-rebels who helped topple veteran strongman Muammar Gadaffi in a 2011 uprising, have been on strike since late July and imposed a blockade on oil terminals. They accuse the authorities of corruption by selling crude in excess of documented cargo, while the government says the guards have been trying to sell oil on the black market. Libya was producing between 1.5 million to 1.6 million barrels of crude oil per day before the striking guards imposed the blockade on the country's main export terminals. The parliamentary commission warned that the militia's actions 'will encourage other (groups) to carry out similar acts.'”
Libya is almost entirely dependent on oil and gas for its foreign exchange earnings, with hydrocarbons accounting for more than 80% of its GNP and up to 97% of its exports. The commission also took a swipe at Libya's National Oil Company (NOC) for declaring on Aug. 21 a force majeure at the main terminals of Zueitina, Ras Lanouf, Al-Sedra and Brega in the east of the country. The measure exonerates the NOC from its responsibilities in case it breaches contracts to supply oil, if it invokes exceptional circumstances. The commission said the strike action had provoked 'a budget shortfall' since the national budget was calculated on the basis of production standing at 1.6 million barrels a day, for an average price of $US90 per barrel. The protest strike kicked off with policemen and border guards demanding back pay. Armed guards in charge of protecting Libya's vital oil industry were formed by the defense ministry after the fall of Gadaffi, and include rebels who helped topple him. Since the uprising two years ago, Libya's new rulers have been caught in a tug-of-war with the former militiamen, who use weapons they amassed during the revolt whenever their interests are at risk.